Should You Choose a Roth IRA Over a 401(k) for Retirement Savings?

With 2026 just weeks away, you might already be setting goals for next year, including for retirement savings. While earmarking cash for the future is a great start, you also have to decide where to put it so it can do the most good for you. That can prove tricky if you don't know how certain types of retirement accounts work.

Two of the most popular retirement accounts worth considering are 401(k)s and Roth IRAs. Understanding the pros and cons of each will help you decide which is right for you.

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401(k) vs. Roth IRA: Who can contribute?

First, it's important to make sure you're eligible to contribute to both types of accounts. If not, your decision is made for you.

You'll only have access to a 401(k) if your employer offers one. Some companies also require you to work there for a certain amount of time, like one year, before you're eligible to participate in the plan. Talk to your HR department if you're unsure of its rules.

Roth IRAs have income limits. If your annual income exceeds these limits, you may be able to contribute a reduced amount or nothing at all. As long as this doesn't get in your way, you can open a Roth IRA with any provider you'd like.

Why save in a 401(k)?

Traditional 401(k)s offer three key advantages to retirement savers. First, they give you a tax deduction in the year of your contribution. This can reduce your tax bill today. You might prefer this if you expect to drop into a lower tax bracket in retirement.

Second, your employer might match a portion of your contributions. Companies that offer matches typically give you $1 or $0.50 for every dollar you contribute up to a certain percentage of your income. This could be worth thousands of dollars today and possibly tens of thousands by retirement.

Third, 401(k)s have high contribution limits, so they're great choices for those who hope to save large sums for retirement. In 2026, you can save up to $24,500 if you're under 50, $32,500 if you're 50 to 59 or 64 or older, and $35,750 if you're 60 to 63.

That said, 401(k)s have their drawbacks too. You'll only have a limited number of investment options to choose from, and if your plan charges high fees, this could slow the growth of your savings over time. You'll also have to pay ordinary income taxes on your withdrawals in retirement, which means that your 401(k) funds aren't all yours.

Why save in a Roth IRA?

Roth IRAs are popular because you fund them with after-tax dollars. This means you don't get any upfront tax break when you make your contributions, but your money grows tax-free afterward. You also get tax-free withdrawals in retirement, provided you're at least 59 1/2 and have had the account for at least five years. This gives you a lot more control over your retirement tax bill.

You'll also have an easier time accessing your savings under 59 1/2. You can take out your Roth IRA contributions at any age without penalty, and you can take out Roth IRA conversions after five years. That said, it's probably best to leave your funds in your account until retirement, especially if you're worried about running out of money prematurely.

IRAs of all types also give you greater freedom to invest your money how you'd like. This can help you minimize what you pay in fees. But if you're not comfortable choosing your own investments, this might not be a selling point for you.

Roth IRAs have far lower contribution limits than 401(k)s. You can save up to $7,500 here in 2026 if you're under 50 or $8,600 if you're 50 or older. This will likely be plenty for most people, but those with a lot of cash to spare may find the ceiling too low.

Choose both -- or neither

There's no rule saying you have to contribute to just a 401(k) or a Roth IRA. Using the two in combination can give you the best of both worlds. You might start saving in your 401(k) first until you've claimed your entire employer match. Then, you can switch to your Roth IRA. If you max that out, switch back to your 401(k) until the end of the year.

You could also consider using a Roth 401(k) account if your employer offers this. It combines the high contribution limits of a 401(k) with the tax benefits of a Roth IRA. Plus, it doesn't have income limits so it's open to high earners.

Think about which account(s) make the most sense for you and then come up with a strategy for 2026. Just remember to keep tabs on your contributions throughout the year to make sure you don't accidentally exceed the annual limits.

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